The ITC Should Consider the Public Interest in Patent Decisions

Note: This post was co-written with Rashmi Rangnath, Director of Global Knowledge Initiative, and Staff Attorney

The Administration overturned a decision to ban imports of technology products that infringe patents. This reaffirms the principle that an automatic ban on product importation is not in the public interest.

The public interest has to be a central concern in decisions
about technology policy. The Obama Administration, through the United States
Trade Representative (USTR), reaffirmed this principle this past Saturday when
it overruled a recent International Trade Commission (ITC) decision to ban
imports of certain Apple products including the iPhone 4.

The ITC is a specialized court that decides patent
infringement cases. If the ITC finds that a product infringes a patent in
certain circumstances, then the ITC will, as a matter of course, ban
importation of that product. This is exactly what happened as part of the Apple
/Samsung litigation: the ITC ordered a ban of the iPhone 4 and other Apple
products on the ground that they violated patents owned by Samsung and relating
to CDMA encoding and decoding (CDMA is a cell phone network technology used
mostly by Verizon and Sprint in the US.)

The problem, as recognized by the USTR, is that the ITC
imposes these bans without consideration of the public interest. In the case of
the iPhone4, the injunction would have cut consumers off from access to phones
that are significantly cheaper than the latest models of iPhones, effectively
raising the prices for a significant market share of smartphones. A ban on
their import would have been particularly unjust given that Samsung’s patented technology
made up only a small part of the many technologies in the iPhone 4.

We applaud the USTR for directing the ITC to consider the
public interest in the Apple/Samsung litigation, as it recognizes the direct
impact that patents have on consumer access to technology. Significantly, the
USTR also urged the ITC to apply this standard to future cases noting that:

“in any future cases involving SEPs [standards-essential
patents], the Commission should be certain to 1) examine thoroughly and
carefully on its own initiative the public interest and 2) seek proactively to
have the parties develop a comprehensive factual record related to these issues
in the proceedings before the Administrative Law Judge and during the formal
remedy phase of the investigation before the Commission ….”

Standards-essential nature of patents should not be the sole factor in determining impact on public interest.

But a lingering
question remains relating to the nature of Samsung’s patents as “standards-essential
patents.” One of the factors that influenced the USTR’s decision was that the
patent Samsung claimed was a standards-essential patent. In
this context, a “standard” is a technology that many product makers across
different companies agree to use in order to make interoperable products. For
example, USB ports follow a particular standard so that the same plugs fit all
sorts of different devices. The advantage is that
products can interoperate and consumers would not have to buy a whole
range of accessories when they buy one new device. Thus, standards facilitate
interoperability and facilitate greater consumer choice.

Often technologies that become part of standards are
patented. In the development process, patent owners of these
standards promise to license their technology to anyone who wants to employ that standard on Fair, Reasonable, and Non-Discriminatory terms (FRAND terms).

Standards-essential patents, like those covering WiFi or USB, have a
particularly prominent impact on the consumer interest. Those patents
affect whole classes of technologies, and assertion of those patents can
obstruct interoperability and market competition. The USTR considered the
adverse impact of such behavior to be especially grave.

But whether a patent is standards-essential or not should
not be the only thing, or even the most important thing that determines what
is in the public interest. The ultimate determinative factor must be the
public’s interest in access to valuable and beneficial technologies whether or
not those technologies are approved by a standards board. Indeed, consider the
following factors that could militate against an importation ban of the iPhone
4 or other products, none of which have anything to do with technology
standards:

Whether the iPhone 4 has far more features than
the scope of the patent, so an importation ban would exclude those additional
features with no justification

Whether the alternative products made by Samsung
are an adequate alternative to the products being banned

Whether Samsung is actually making any products
available, rather than just engaging in a “domestic industry of licensing”

As is apparent, the public interest is much more expansive
than the question of whether a patent is standards-essential or not. Accordingly,
where the ITC’s duty, according to the USTR, is to consider importation bans in
view of the public interest, the ITC’s inquiry must be much more expansive as
well.